The Commission should have examined the State's financing of public television channels
SIC is a commercial company which has since 1992 been operating one of the main private television channels in Portugal, which is exclusively financed by advertising.
RTP operates the Portuguese public television channels. For its financing, RTP receives both revenues from the advertising on its channels and annual State grants by virtue of its public service obligations. From 1992 to 1995, the amount of the public grants represented between 15% and 18% of RTP's annual receipts.
In 1993 and 1996, SIC lodged complaints with the Commission concerning the grants to RTP and other measures in its favour, arguing that these constituted State aid distorting competition, which should therefore have been notified to the Commission in advance and authorised by the latter.
On 7 November 1996, the Commission adopted a decision in which it concluded that the measures complained of by SIC in its first complaint of 1993 did not constitute State aid within the meaning of Community law.
On 3 March 1997, SIC brought an action before the Court of First Instance for the annulment of the Commission's decision. SIC challenged the classification of the measures complained of, and in particular accused the Commission of infringing the procedure for examining State aid by adopting its decision without gathering the observations of RTP's competitors.
Community law provides that the Commission may not terminate the preliminary examination of such measures (the first stage of the procedure) with a favourable decision unless it has been able to convince itself that the measures in question are not State aid, or are aid that is compatible with the common market. If, on the other hand, after that first examination, it has serious difficulties in assessing the measures in question, the Commission must commence a formal procedure (second stage), during which interested third parties may submit their observations.
In this case, having found that the Commission adopted a decision that was favourable to the measures complained of by SIC at the conclusion of the first stage of the procedure, the Court of First Instance examined whether the assessments on which the Commission based its decision presented serious difficulties capable of justifying the opening of the second stage of the procedure.
Concerning the grants paid to RTP each year by the Portuguese State, the Court of First Instance found that, according to the decision itself, they have the effect of conferring a financial advantage on the beneficiary, which is a decisive element in the concept of aid. Concerning the possible impact of that advantage on the conditions of competition, the Court noted that RTP is a public operator which is present in the advertising market and is therefore in direct competition with other television operators. The Court therefore found that the Commission's assessment that there was no State aid present was, at the very least, likely to raise serious difficulties.
Even if those measures had been presented as being intended to compensate for the extra cost of the public service obligations undertaken by RTP, the Court of First Instance noted that, under Community law, that circumstance is irrelevant to classification as State aid. It may only be taken into account by the Commission in order to authorise aid measures, under conditions laid down by specific provisions of the Treaty.
Concerning the other measures complained of (tax exemptions, payment facilities, rescheduling of the debt due by RTP to the Portuguese social security system, and non-recovery of fines and interest thereon), the Court found that, according to the documents on file, the Commission was also confronted with serious difficulties of assessment at the conclusion of the preliminary examination.
The Court further held that the duration of the preliminary examination, of about three years, significantly exceeded the time normally involved in a first examination. That fact, combined with the other findings in the case, tended to confirm the existence of serious difficulties of assessment requiring the second stage of the examination procedure to be opened, in order to enable interested third parties to submit their observations.
In those circumstances, the Court of First Instance annulled the Commission's decision.
Note: In its judgments of 15 September 1998 in Gestevisión Telecinco v Commission and 3 June 1999 in TF1 v Commission, concerning complaints against the existence of State aid in favour of the operators of public television channels in Spain and France, the Court of First Instance found that the Commission had unlawfully failed to act in refraining from adopting a decision in relation to similar measures.
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